Why the Sudden Boom in Oil Production in New Mexico?

The Permian Basin is currently experiencing a major boom, which has made the Permian the most prolific basin in the United States. One-third of this massive basin lies in southeast New Mexico, with the remaining two-thirds in West Texas.

The Permian Basin has been producing oil for nearly 100 years. However, the recent boom in oil production in the Permian has come through the revolutionary development of shale extraction and production techniques, led by hydraulic fracturing and horizontal drilling. Crude oil now coming out of the Permian is frequently referred to as Shale Oil.

In addition to the rapid expansion of shale oil development in the Permian Basin, industry geologists have discovered massive oil reserves on the New Mexico side of the Permian, specifically in the Delaware Basin of New Mexico. The Delaware Basin has an underground geology consisting of multiple stacked layers of shale formations filled with oil and gas. Recently, the USGS confirmed the existence of these oil rich shale formations at varying depths underground. The discovery and announcement is unprecedented in the history of oil and gas development.

New Mexico Oil and Gas:
Turning a State Budget Deficit into a Budget Surplus

In 2018, both state and federal lease sales in the Permian Basin went through the roof. A single, federal lease sale for mineral rights in the Delaware Basin in the fall of 2018 alone produced a record one-billion dollars of revenue, of which 48% goes to New Mexico. (The highest bid for sections in this sale went for a staggering $95,000/acre.) All of the development and increased oil production has turned a New Mexico state budget deficit (just two years ago) into a $1.1 billion dollar state budget surplus in 2019. An estimated 45% of the 2019 New Mexico state budget now comes from revenues produced by the Oil and Gas Industry in New Mexico, by far the largest industry in the state. That’s an estimated $3.5 billion dollars in direct tax, lease and royalty revenue to the state. (That estimated figure doesn’t include corporate or payroll taxes.) The state revenues from Oil and Gas will be pumped into education, infrastructure, public safety and environmental protection in New Mexico. Likewise, over 100,000 jobs alone in New Mexico come from the Oil and Gas Industry.

The New Mexico Land Grant Permanent Fund

In the past ten years, our industry contributed $5.1 billion to New Mexico’s Land Grant Permanent Fund that was built and is continuing to be fueled by oil and gas revenues. The entire fund is now worth nearly $18 billion. Every year the fund pumps hundreds of millions of dollars into education and 20 other public entities.

For a quick overview of how the Land Grant Permanent Fund, fueled by the oil and gas industry, improves all walks of life for state residents, take a look at any of these resources below.

Tracking the Money

(Click To See Report Below)

A Brief History of Shale Oil

Fifteen years ago, shale oil development was in its infancy. However, most analysts at the time did not think shale oil would become a profitable extraction method due to higher production costs. Foreign oil producing countries, including OPEC, held a dominant stranglehold on the world’s crude oil production. OPEC dismissed shale oil as non-relevant to overall world market.

However, the oil and gas industry learned how drill and operate efficiently to make shale oil possible and profitable. This operational revolution has decreased the United State’s dependency on foreign oil by increasing domestic production. Many analysts did NOT see this boom coming. Thus, as domestic oil production has boomed because of shale oil, the role and influence of OPEC has diminished significantly. Where as in the past OPEC could essentially control oil prices due to production cuts and increases, now, the new OPEC (OPEC + Russia) is being forced to react to U.S. oil production.

The Future

In 2021, President Joe Biden took office and immediately halted all leasing and permitting on Federal Lands. This shortsighted move was made under the guise of environmental considerations. Unfortunately, any halt or disruption of domestic oil and natural gas production will increase environmental damage, and will play directly into the hands of foreign producers. The citizens of the United States will not simply stop driving automobiles or cease manufacturing life-saving medical equipment made from petroleum products. The demand will continue into the future. As the domestic supply decreases, the United States will to rely more on importing foreign oil, which is is produced with far less environmental regulation than in the United States. It will also dramatically increase the price we pay at the pump.

IPANM is lobbying the current administration to reverse these damaging policies. We encourage all Americans to push back on these foolhardy proposoals!